A new version of the pay-TV environment is emerging – and, in the kinds of deals programmers will sign for their content, it looks pretty much the same as it used to, in the old days. “We believe the future of pay-video will revert to the pay-TV model – selected players will be on MG, others on rev-share,” says Media Partners Asia (MPA).

In its latest state of the industry report that will be presented at this year’s Asia Pacific Video Operators Summit (APOS) in Bali, MPA also makes a case for a higher profile for local and Asian premium content, which has already started to chip into Hollywood’s dominance of streaming platforms’ line-ups.

“As exclusive local productions make their way to OTT, consumption patterns on SVOD/OTT are likely to change,” says MPA executive director Vivek Couto. Already, typical consumption on online video platforms in Southeast Asia has shifted from 80% Hollywood/20% Asian to 50% Hollywood/20% local/30% Korean.

MPA’s latest forecasts come shortly after the company said Asia’s TV, film and video production sector “is set to enter a new cycle of growth as economic development and evolving distribution ecosystems stoke competition and demand for better shows, as well as more varied formats and approaches”.

Korean content remains the gold standard for production in Asia, expanding beyond drama and film to become a genre in its own right, MPA says in its March report, Asia Video Content Dynamics, noting that costs are increasing in Korea’s highly competitive domestic marketplace,where profits are challenging. “At the same time, demand and pricing power in MPA-surveyed markets continue to rise across both TV and online video, helping sustain Korea’s leadership position,” MPA says.

“Multiple genres are fueling consumption on free, pay and OTT services. Local dramas, however, remain the most important ratings driver

across much of the region, despite concerns about stale storylines,” the report adds.

In India for example, domestic drama accounted for more than half of all TV viewing last year. Local series were also popular in Southeast Asia, representing 46% of viewing in Vietnam, 35% of viewing inThailand and 31% of viewing in the Philippines. Movies also tend to rate well on TV, especially in countries with a strong domestic film industry. “This is especially evident in India as well as Indonesia and the Philippines, the two markets in Southeast Asia with the largest box office and where local films also have the highest share ofrevenue,” MPA says. MPA predicts that OTT/streaming content aggregators – Amazon Prime, Fox+, iflix, Netflix and Viu – will play a central role in the future of pay-video, replacing the channel owners of days gone by and shifting telco’s direct relationshipwith channel/content brands a layer down. This follows significant content spend by OTT/streaming platforms, particularly in emerging Southeast Asia.

In 2016, MPA figures show SVOD OTT players in the region spent almost US$200 million on content (excluding sports), compared to about US$250 million that pay-TV platforms spent. OTT spend on content in developed Southeast Asia is way lower at about US$100 million compared to about US$800 million in the pay-TV industry.

MPA’s picture of the future is drawn against an environment where SVOD services’ indirect reach will outstrip direct reach by a long way in 2021. Taiwan and India, where direct-to-consumer reach will be signifi- cant, are the exceptions.

Netflix, says MPA, is slowly emerging as key direct-to-consumer proxy across the region, driving deep consumption of its platform in markets such as India, Malaysia, Philippines and Thailand.

SVOD revenues are forecast to “climb rapidly from a low base”, reaching US$500 million a year in aggregate across Southeast Asia and Hong Kong and US$200 million in India alone by 2022.

The SVOD-based online video business in Southeast Asia generated US$80 million last year. The average annual growth rate over the next five years is about 40%, “with many markets on a long-term growth cycle (10-15 years) due to telco ubiquity especially in Indonesia, Philippines, Thailand and Vietnam,” Couto says.

There will be about 400 million mobile broadband subs in Southeast Asia by then, about 60% of the combined population, by 2021. In Hong Kong and Taiwan, MPA expects the SVOD opportunity to scale to US$285 million a year by 2021 compared to US$90 million a year today.

Couto describes AVOD as “a big opportunity” in Southeast Asia at about US$250 million, growing to US$850 million by 2021. This is largely dominated by YouTube and Facebook, “but we see a world where big local free-to-air players with digital platforms start taking share here, much as Hotstar and Voot are doing in India,” Couto says.

“The key thing there is that while mobility, SVOD and AVOD take all of us into massive reach and engagement and moves beyond households and into users, the monetisation of that reach is far lower than that of TV,” he adds.

“In fact, right now the way it’s building up, online video is a key addition to TV and the multi-channel business. We can’t afford it to be a full replacement vehicle over the medium term because the dollars alone cannot sustainably fund the premium content ecosystem,” Couto says.

The emerging SVOD story will run alongside significant shifts to digital advertising in Asia. MPA says five markets in Asia retain “big actionable opportunities” for advertising growth for free-to-air and, in some instances, pay-TV businesses over the next five years.

Indonesia, India, the Philippines and Thailand will remain important markets for TV advertising, says MPA. New video advertising dollars in the other markets will come mostly from digital, with the most extreme shift happening in Singapore, followed by China.

About 80% of new video ad dollars in Indonesia in the next five years will be from free-TV businesses, followed closely by the Philippines and then Vietnam. More than 60% of new advertising revenue in Thailand and India will also come from traditional video.

Digital is making a real mark in Hong Kong, Malaysia, Korea, Taiwan, China and Singapore, where no more than 40% of new ad revenue will come from free-TV/pay-TV, MPA says. Both China and Singapore are be- low 10%, and Taiwan and Korea are below 20%.

The subscription shift is perhaps less dramatic, with new revenue growth still beating out digital revenue growth in eight markets, hovering at the 50% mark in one, and dipping to 40% and below in two.

Singapore will see the most startling shift to digital subscription, withless than 5% of new subscription revenue growth coming from traditional free-TV/pay-TV services between now and 2021.

India remains overwhelmingly a traditional television subscription market; more than 90% of new subscription dollars over the next five years will come from TV services.

SVOD in India is led by players such as Netflix and Amazon and then layers within Hotstar, but the on-demand sector is dominated by AVOD models. “We see the India OTT opportunity at more than US$1.3 billion a year by 2021 with SVOD at less than 15%,” Couto says.

India is followed by Vietnam, where digital will be about 15% of the subscription markets. The third market where digital will take less than 20% of new subscription dollars is Korea.

Traditional subscription businesses in the Philippines, Indonesia, Taiwan, Malaysia and Thailand will take more than 50% of new subs revenue in the next five years but SVOD services from pan regional majors, global players and local incumbents will eat their way into the share of wallet in all these markets.

Another key trend is the rapid growth of broadband in Asia. In many cases, fixed broadband penetration is higher than pay-TV penetration. Singapore, for instance, has 100% broadband penetration, but less than 80% pay-TV penetration and it’s likely to veer towards 70% in the future. The gap is biggest in Japan, which has 80% broadband penetration and 20% pay-TV penetration. Broadband penetration is also higher than pay-TV penetration in Hong Kong, China, and Vietnam. India has the highest gap the other way, with over 80% pay-TV penetration and about 10% broadband penetration. Smartphones and 4G will fuel mobile broadband penetration, and next generation mobile broadband will fuel OTT and channels.

Published on ContentAsia's APOS Special, 19 April 2017